Australian start-ups should stay local, says tech investor

Jonathan Teosays technology start-ups had become less risky in recent years, opening the door to more mature investors. Photo: General Catalyst Partners

James Hutchinson

Technology start-ups have a greater chance of developing unique products and software if they stay in Australia instead of moving to Silicon Valley, according to well-credentialed investor Jonathan Teo.

Mr Teo, whose venture capital fund General Catalyst Partners was an early investor in popular social networks Twitter and Instagram, said Australian start-ups had the opportunity to differentiate themselves from their US counterparts by avoiding the “common wisdom” of Silicon Valley start-ups.

“It’s the same thing I say when people ask me about the opportunities in New York and Los Angeles – every region and every geography has a certain set of resources that are best suited to build a certain type of company,” he told The Australian Financial Review.

Though start-ups are generally drawn to establishing offices in the US to seek capital funding, staff and a more favourable regulatory environment, Mr Teo said companies could risk losing any qualities that made them unique to investors and potential users.

“Australia has so much going for it in terms of the uniqueness of the thinking, the cultural relevance to the Western world, but it also has a distance from a lot of the common wisdom that exists in Silicon Valley and can sometimes blind entrepreneurs to a different approach to things,” he said.

“That’s the reason we do see a lot of interesting companies still coming out of Australia: they get born in a different petri dish and sometimes they are more resilient.”

Mr Teo, whose firm also participated in an early $15 million raising round for Australian company BigCommerce, is set to visit Australia this week to meet with a range of investors, including those traditionally associated with start-ups and more mature private equity investors.

He said technology start-ups had become less risky in recent years, opening the door to more mature investors, such as private equity and superannuation funds, to look at the companies as potential investment ­targets. “It’s definitely opening up. Relatively speaking it’s still more risky than what a lot of traditional investors are used to,” he said.

“These days because of the connectedness of our society, and just because of the way that technology has enabled us to decouple capital from the networks and experience base, sometimes entrepreneurs are just able to look at the cheapest capital.

“Now you tend to have some late-stage funds actually investing in start-ups where before they probably wouldn’t have at an early stage.”